Tons of ad spending goes to waste thanks to fraud. When Juniper Research estimated the scope of the problem, it found that marketers lose as much as $19 billion thanks to fraud among advertising industry parties. Here’s how blockchain could help, shares, Kayla Matthews, Blogger, Productivity Bytes.

Before much longer, individuals and organizations around the world will become aware of blockchain in hundreds of different ways. This is because of the technology's undeniable potential for disruption — from financial services to introducing greater oversight into our supply chains.

Blockchain is likely to remake the advertising technology business in its own likeness, too. It's not a secret that advertising effectively on the internet requires high-quality communication skills, mindfulness of ethics and, of course, a killer product. If a company doesn't have these things, people have dozens of ways to tune it out.

Blockchain isn't going to help with the killer product part, but it can definitely improve the advertising industry's honesty problem. Here's a look at the difficulties adtech faces today and a glimpse into how blockchain can help.

What Kind of Problems Does Adtech Have?

According to research provided by Statista, the world of global commerce spent $269 billion in 2018 on online banner, pop-up and video advertisements. By the end of 2020, projections indicate this number could rise to $335 billion.

That's a lot of money in potential impressions and conversions. The trouble is, tons of that ad spending currently goes to waste thanks to fraud. When Juniper Research estimated the scope of the problem, it found that marketers lose as much as $19 billion per year by not understanding the role of, or not having the right tools to correct for, fraud among advertising industry parties.

What types of fraud are involved here? It's things like:

Websites are using automated bots to falsify ad impressions and make them look more successful than they are at generating traffic.

Publishers are inflating their fees based on false promises of their audience, their reach or the quality of their publication.

It's difficult to gauge the ROI and effectiveness of a campaign at the best of times, and things only get more challenging as fake users enter the mix. Information-sharing in the adtech space is challenging and prone to errors and falsification.

Unauthorized parties sometimes claim to have access to inventory (ad space) they have no right or ability to sell, as happened with The Guardian U.S. recently.

In that last story, it took a team effort between the newspaper and Google to figure out how bad actors sold ad space through MightyHive without The Guardian seeing a penny of it. The truth is, these criminals didn't actually have anything to sell — but they made their offerings look credible enough that somebody ended up taking them up on it. This happened on a legitimate ad exchange, no less. Then came the investigation.

The point is, advertising technology delivers a lot of good for companies, brands and even consumers. However, it's easy for it to be turned toward more selfish ends, and the system clearly doesn't do a good enough job policing itself.

What blockchain offers, fundamentally, is the means to record a vital piece of information just once, and then be able to provide it as immutable proof that something exists somewhere. It proves an action or event took place, or that a transaction occurred between two or more parties.

How Blockchain Helps Adtech's Credibility Problem

Thankfully, the main story here isn't that clever people will always find ways to commit fraud, no matter the environment. It's that even more talented people will find new ways of stopping them. Right now, blockchain is one of the most exciting tools for doing that.

After conducting research in 2015, the Association of National Advertisers (ANA) concluded that every ad campaign it studied had been served to click simulation bots, while only 70-90% of them were seen by real human users. In other words, up to 30% of the funds for these campaigns went to waste — a problem the ANA believes could cost a cumulative $50 billion per year in the U.S. by 2025. That's because of a lack of quality information-gathering and reporting and because there's no easy way to discern the identity of a legitimate user from a bot.

It's safer to buy display advertising directly from publishers, and it guarantees campaign visibility and eliminates some of the middlemen who can fudge the numbers on campaigns. However, this can be time-consuming and labor-intensive for companies and organizations with big ad spends.

Blockchain proposes a few ways to clean up the messy supply chains that end up filling exchanges with bad actors and our campaign reports with bad analytics. Here are some of the qualities of blockchain and how they can help ensure trustworthiness while purchasing, publishing and reporting on ad campaigns:

Immutable recordkeeping: Individual actors cannot change entries in blockchain's distributed ledger, meaning campaign success can't be falsified after the fact. Moreover, one bot can't pose as multiple users to generate false traffic. A click is a click is a click.

User authentication: Blockchain provides authenticity for user identities and credentials, not just recordkeeping. A few of the stories we hear about today involve parties making false claims about who they are and what they have to offer. Blockchain provides a rock-solid means of verifying that an online party is who it claims to be — the equivalent of a digital Social Security or driver's license number, but for use in buying and selling advertising space. In the future, these types of credentials will form part of a larger identity trust fabric and will likely transcend the boundaries of industry for even wider usefulness.

Information sharing: Blockchain's ledger isn't just immutable — it's also decentralized, sharable and transparent. In some cases, it can require a dozen or more parties to place a single advertisement on just one website. The cryptographic "fingerprint" blockchain applies to incoming data as it's transcribed to the ledger means all these parties can view the same set of data, in real-time. It can be difficult to judge the effectiveness, success and ROI of an ad campaign at the best of times, but with blockchain, every party can measure the same campaign data in the same ways and come to the same conclusions.

It's not a secret that there's uncertainty in the advertising industry — and some of it is well-earned. There can be mistrust between parties and even outright lying.

Even under the best conditions, when fraud hasn't entered the picture, data tends to get siloed and isolated among industry figures, including clients, publishers and marketers. A company might have every confidence in its partners, but blockchain stands to streamline and even automate a lot of the back office functions it probably manages by hand. Smart contracts built on blockchain can execute commands automatically when certain thresholds are met or a predetermined event happens — like a campaign kicks off, concludes or fails to meet expectations.

Every dollar counts in this industry, and blockchain looks like it's going to help every party involved make sure theirs are counted, too.

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